Black Americans continue to lag behind white Americans in terms of building wealth as only 55% of Black Americans reported having stock market investments compared with 71% of white Americans, according to a recent survey released by Charles Schwab and Ariel Investments.
“Black Americans are already behind the eight ball, and it is disheartening to see that at current savings and investing rates, the wealth gap will continue to expand, endangering our futures and leaving our families exposed,” Mellody Hobson, co-CEO and president of Ariel Investments, said in a release.
According to the 2020 Ariel-Schwab “Black Investor Survey,” Black Americans are less likely than white Americans to own almost every type of financial vehicle, except for whole life insurance. The survey also found they are less likely than white Americans to have written wills, financial plans, or retirement plans.
And the disparities are growing monthly as Black Americans save $393 overall per month, compared with whites, who save an average of $693 per month. Even Black Americans who earn more than $100,000 a year consistently save or invest considerably less than their white counterparts at the same income level, according to the survey. And only 23% of Black Americans have inherited wealth, compared with 51% of white Americans.
“These differences are not new,” Hobson said. “Black Americans are disadvantaged from the outset when it comes to building wealth.”
However, there were also some positive trends that indicate younger generations are starting to close the racial wealth gap, at least in terms of stock market participation. The survey found that 63% of Black Americans under the age of 40 are now participating in the stock market, which is equal to white Americans of the same age. It also found that three times as many Black investors (15%) as white investors (5%) invested in the stock market for the first time in 2020, and that 29% of Black investors under the age of 40 were new to investing in 2020 compared with 16% of white investors under 40.
The survey also found that 401(k) plans have become an important vehicle for introducing many Black Americans to investing, with 63% of Black investors having first invested in the stock market through one. And 401(k) ownership rates are now similar between Black and white Americans (53% vs. 55%); however, there is a gap between savings rates as white 401(k) plan participants contribute 26% more per month toward their retirement accounts than Black 401(k) plan participants.
“These findings are encouraging for younger Black investors, but there is much work to be done to ensure that Black Americans have access to the resources they need to stay engaged and successfully investing for the long term,” Rick Wurster, executive vice president, Schwab Asset Management Solutions, said in a release.
The survey also found that the COVID-19 pandemic affected more Black Americans financially than white Americans. While both groups reported a sharp increase in saving for emergencies compared to prior years, the pandemic’s economic impact caused Black Americans to take action in greater numbers than white Americans. More than twice as many Black Americans (12%) as white Americans (5%) borrowed from their 401(k) plans, and 18% of Black Americans dipped into an emergency fund, compared with just 10% of white Americans. And 9% of Black Americans said they asked their family or friends for financial support last year, compared with 4% of white Americans.